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SCA’s MANAGEMENT IS MISMANAGING THE FOUR VILLA RESERVE FUNDS.
By Forrest Quinn
The Villa Neighborhood’s 2024 reserve assessments are too high, resulting in 110% to 184% reserve funding. Greater than 100% reserve funding means assessments exceed the Villa’s accrued depreciation on their common elements/assets. In other words, Villa owners are paying for more than they used/consumed. Note: Percentage funding = (Reserve Fund cash and investments) / (Fully Funded Balance, i.e., the Accrued Depreciation). See the table below:
THE VILLA’S 2024 BUDGETED RESERVE ASSESSMENTS ARE NEITHER NECESSARY NOR REASONABLE.
Nevada HOA law limits a Board’s power to impose assessments, NRS 116.3511: “…the executive Board may, without seeking or obtaining the approval of the units’ owners, impose ANY NECESSARY AND REASONABLE assessments against the units in the common-interest community. Any such assessments imposed by the executive Board MUST BE BASED ON THE STUDY OF THE RESERVES of the association…”
Below are summarized results from SCA’s 2024 reserve study. It shows that the Board’s 2024 villa assessments are too high as the Villa reserves exceed 100% funded for years to come (shaded areas). Consequently, the proposed assessments are neither necessary nor reasonable.
THERE IS NO STATED RESERVE FUNDING PLAN FOR THE VILLAS.
There are three basic reserve funding strategies: 1) Baseline funding, the riskiest plan, is a low funding plan that keeps the minimum cash balance above zero. 2) Full funding means establishing a plan that keeps the reserves at or near 100% funded. 3) Threshold funding is a specific dollar amount or percentage funded greater than baseline funding but less than full funding.
In the 2024 reserve study for the Villa neighborhoods, Management used a fourth funding strategy – way, way more than needed, yet inconsistent from Villa to Villa. In some cases, greater than 100% funding and, in other cases, more than 200% funding. Likewise, why is one Villa greater than 100% funded for just two years while another Villa is over 100% funded for a decade? The randomness and inconsistency of the Villa assessments are more proof they are arbitrary and capricious rather than necessary or reasonable.
RADICALLY DIFFERENT RESERVE FUNDING PLANS
The Management’s treatment of Villa reserves is entirely different than how the Board treats the Main Association and Pinnacle reserves. Management inexplicably adopts a reserve funding plan where Pinnacle’s reserves drop to the low 30 percent range in 2031 and 2032. In contrast, Clubhouse Villa’s percentage funded remains above 100% in 2031 and 2032.
Page 118 of September’s Board Book states that a $566/home special assessment to reach 90% funding for SCA’s main reserve is unreasonable. So why is a Club House villa assessment for $5,124/home, resulting in an 184% funded position acceptable?
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